Correlation Between Capgemini and Air Liquide

Can any of the company-specific risk be diversified away by investing in both Capgemini and Air Liquide at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capgemini and Air Liquide into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capgemini SE and Air Liquide SA, you can compare the effects of market volatilities on Capgemini and Air Liquide and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capgemini with a short position of Air Liquide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capgemini and Air Liquide.

Diversification Opportunities for Capgemini and Air Liquide

0.89

Correlation Coefficient

Capgemini  Air Liquide

Very poor diversification

The 3 months correlation between Capgemini and Air is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Capgemini SE and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA and Capgemini is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capgemini SE are associated (or correlated) with Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of Capgemini i.e., Capgemini and Air Liquide go up and down completely randomly.

Pair Corralation between Capgemini and Air Liquide

Assuming the 90 days trading horizon Capgemini SE is expected to under-perform the Air Liquide. In addition to that, Capgemini is 1.31 times more volatile than Air Liquide SA. It trades about -0.05 of its total potential returns per unit of risk. Air Liquide SA is currently generating about 0.01 per unit of volatility. If you would invest  15,780  in Air Liquide SA on September 4, 2024 and sell it today you would earn a total of  174.00  from holding Air Liquide SA or generate 1.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Capgemini SE  vs.  Air Liquide SA

Capgemini SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capgemini SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Air Liquide is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capgemini and Air Liquide

The main advantage of trading using opposite Capgemini and Air Liquide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capgemini position performs unexpectedly, Air Liquide can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Air Liquide will offset losses from the drop in Air Liquide's long position.

The idea behind Capgemini SE and Air Liquide SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.